Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.



In a post over the weekend I wrote a very general response to the so-called 'game-changer' at the EU Summit, wherein Germany supposedly 'caved-in' to threats by Spain and Italy to wreak havoc with the EU economic system (and the Euro currency mechanism) unless Germany bent over for them.

The summit had been a total failure up to that point, with Germany saying no to everything, and other EU powerhouse nations threatening retaliation.

The summit had to end on a high note, for the sake of the media at least. So they EU nations' representatives announced a HUGE BREAKTHROUGH and the press ran with it.

No real breakthrough of course. Europe is going to make it easier for the EU to steal more money from EU citizens and pump it into their insolvent banks. A new EU position of "Supervisor of EU Banking" was also announced, which the media portrayed as a defeat for Germany and Merkel. Not so fast. What if Merkel and her German friends get to be the supervisor, which in all likelihood is the case.

Europe has two huge problems, the first is global, and is also shared by the smug Americans who think TARP and the continuing back bailout by BBernanke is working: 1) too much debt, both private and public; 2) the Euro contains an inherent imbalance and inequality -- no one currency can work for a multitude of nations and economies once the economic and debt expansion changes into a contraction as it ALWAYS DOES and ALWAYS WILL. During the expansion, debt grows and income grows and debt issues are always manageable because there is no foreseen end to income growth. Then, suddenly, 18 years after the expansion began, the expansion ends and begins to wither.

Then monetary policy takes over, trying to 'fertilize' the rotting fruit at the top of the tree. Lower interest rates help some economies and hurt other economies -- inflation is not always equal. The same with higher interest rates: some nations need lower currency values to boost imports; other nations, sinking in to depression earlier than others, need to manipulate their currencies to monetize their debts.

The Euro IS the problem for Europe -- along with the mountains of debt -- and the EU problem won't be 'fixed' until they get rid of the Euro.

Those who argue that debt is not the problem -- that cheap credit is the problem -- please look at this one chart below showing only the US debt problem and tell me what pattern one can see from this 'a picture is worth a thousand words' image.

Anyway -- back to my story -- I should have been more careful about suggesting all Europeans were not wise. So I wrote this response, with a heavy emphasis upon wisdom as a function of Nature's morals and lessons, Nature being, to quote Goethe, the 'Book of Life'.

I should have written those fashioning this 'new deal' BREAKTHROUGH AGREEMENT have little or no wisdom. Europeans, as individuals, may or may not have wisdom. History indicates some Europeans have much wisdom; most have very little -- like Americans, and all other peoples, cultures and modern civilizations.

The 'growth' path the 'wise' Europeans are following -- following the Americans and Mister Bernanke -- are not showing much courage or wisdom. This 'growth path' is merely issuing more debt to try to protect the old unproductive debt taken out too close to the end of the expansion -- mostly after the business cycle expansion was over. Trying to re-fertilize the rotting fruit clinging to the top of the tree in Autumn.

We had an economic expansion, 1983-2001. 2001 was the apex of the Global Idea, the time of the fruiting of the Tree of Life. The time of harvesting the fruit, which is, of course, civilization.

Since 2001, Misters Greenspan and Bernanke has been fertilizing the rotting fruit still on the tree -- fertilizing it with taxpayer money -- while the sap in the tree has reversed course and is descending toward the roots. No tree can bear fruit constantly. During the darkness, the winter, the energy in the tree, the sap, returns to the earth in order to energize the root-system (attempts to continue spraying the dead fruit at the top of the tree so they might expand more is NOT a sign of WISDOM).

Of course, the mighty do not wish to go down with the commoners, with the darkness, into the root-system. It is frightening down there on the ground. But that is the law.

The next expansion, and the crop produced during the next expansion, will depend upon the health of the root system. If the roots are strong, broad, energetic, they will produce more wealth for us. If the root-system has no energy, then the next expansion will be weak (look at Japan).

Forget about saving the rich. They are the high fruit in the tree rotting. They have had their day. The root-system is the poor people living near the ground, near the earth. The Sun has turned his back on the rich fruit in the top of the tree, fruit which has disappointed him with its greed, and its deceptions. Pumping fertilizer into dead fruit in the hope that this might bring them back to life is NOT wisdom.

How do we energize the root-system? We let bad loans default. The root-system is the common citizen, the hard-working citizen who saves money and takes care of his family. We energize the root-system by raising interest rates and rewarding saving. The root-system understands that salvation and saving come from the same root; and that speculation and special-interests come from the same root. These are different seasons.

2001: sap in the fruit at the top of the tree.
2010: sap in the middle of the tree, declining into darkness.
2019: sap energizing the root-system.
2028: sap rising in the middle of the tree.
2037: sap in the fruit at the top of the tree.

Note: the fruit at the top of the tree in 2037 is NOT the same fruit at the top of the tree in 2001 and is not intended to be. Attempts to save this fruit -- the heavily indebted rich, and their banks -- is misplaced energy and exhibits a lack of wisdom.

Michael J. Clark

Hanoi, Vietnam

Sunday 1 July 2012